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Ratio Spread with Calls- Creating a Zero Downside Risk Strategy in Stock Market

Author

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  • Priyanka Vashisht

    (Baddi University of Emerging Sciences and Technology, India)

Abstract

There is a general perception that whenever a Stock goes down, traders in that stock are doomed. This was probably true before 2001, when derivatives were not introduced in the Indian Stock Markets. Nowadays, there are many strategies available in the derivatives segment, which either make huge amounts of money for the traders whenever the market goes down, or there is Zero risk on the downside. One such strategy in options segment of derivatives is Ratio spread with Calls. This strategy has Zero Risk on the downside (with chosen strike prices and entry time), and if the Market is mildly bullish, profits can also be made on the upside. This Research paper examines the results of Ratio spread with Calls as applied on Nifty in 42 monthly F&O series, with the aim to create a Zero Downside Risk Strategy which can be easily understood by even a beginner in Stock Market.

Suggested Citation

  • Priyanka Vashisht, 2012. "Ratio Spread with Calls- Creating a Zero Downside Risk Strategy in Stock Market," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 2(2), pages 48-60, April.
    • Handle: RePEc:dug:actaec:y:2012:i:2:p:48-60
    as

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    File URL: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/1242/1111
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    References listed on IDEAS

    as
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    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    Full references (including those not matched with items on IDEAS)

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